SEC opened formal proceedings on four spot bitcoin exchange-traded product proposals

The U.S. Securities and Exchange Commission on September 28, 2023 instituted proceedings covering four proposed exchange-traded products designed to hold bitcoin: BlackRock-sponsored iShares Bitcoin Trust, Bitwise Bitcoin ETP Trust, Invesco Galaxy Bitcoin ETF and Valkyrie Bitcoin Fund.

The orders did not approve or reject any proposal. They moved each exchange rule filing into a formal stage in which the SEC identified possible grounds for disapproval, requested additional public analysis and preserved more time for review. That distinction mattered in a market where procedural notices were frequently interpreted as predictions of an eventual decision.

The four proceedings also demonstrated the institutional breadth of the applications under consideration. Nasdaq sought to list the iShares and Valkyrie products, Cboe BZX proposed the Invesco Galaxy fund, and NYSE Arca filed for Bitwise. The filings placed major asset managers, regulated exchanges, a cryptocurrency trading venue and the bitcoin spot-and-futures relationship inside the same regulatory debate.

The SEC’s unresolved market-surveillance test

Across the orders, the SEC centered its questions on Section 6(b)(5) of the Securities Exchange Act. That provision requires exchange rules to be designed to prevent fraudulent and manipulative practices and protect investors and the public interest.

The agency asked whether the proposed shares and underlying bitcoin markets were susceptible to manipulation. It also sought views on whether the Chicago Mercantile Exchange’s regulated bitcoin-futures market represented a market of significant size in relation to spot bitcoin.

Another question concerned proposed surveillance-sharing agreements with Coinbase. The exchanges argued that access to Coinbase order and trade data could supplement their market-surveillance programs. The SEC requested evidence about whether those arrangements would help detect, investigate and deter manipulation in the proposed products.

These were requests for analysis, not factual findings that manipulation had occurred or conclusions that the arrangements were insufficient. Each order explicitly stated that opening proceedings did not mean the Commission had reached a conclusion.

Four proposals, separate regulatory records

The iShares proposal sought to reflect bitcoin’s price before trust expenses and liabilities, with assets consisting primarily of bitcoin held by a custodian. Its administrator would calculate net asset value using a CF Benchmarks index. The SEC record identified iShares Delaware Trust Sponsor LLC, an indirect BlackRock subsidiary, as sponsor.

The other proposals used different sponsors, exchanges and reference indexes, but shared the central structure of holding bitcoin rather than bitcoin futures. That separated them from futures-based products already operating under a different regulatory framework.

On August 31, 2023, the SEC had designated decision points ranging from October 16 through October 19 for the four exchange filings. By instituting proceedings on September 28, the agency acted before those procedural dates. The new orders contemplated written comments after Federal Register publication, followed by a rebuttal period. They supplied no approval date and no assurance that any product would begin trading.

Market context and measurement limits

Crypto assets rose during the September 28 session, but the available evidence does not establish that the four SEC orders caused the move. A contemporaneous CoinDesk market report recorded bitcoin at $27,010 at its press-time snapshot, up 3.2% over the preceding 24 hours. Ether was reported at $1,660, up 4.8% over the same rolling window. CoinDesk attributed the broader advance partly to easing Treasury yields, oil prices and the dollar, while ether also benefited from expectations surrounding futures-based products.

Those figures were rolling observations rather than an exchange closing auction or a universal daily close. Cryptocurrency trades continuously across venues, and the report did not provide enough methodology to reproduce its venue mix from the article alone.

For September 28, 2023, the defensible conclusion was procedural: four prominent spot bitcoin product proposals remained alive, but the SEC had escalated its examination of manipulation, market correlation and surveillance. Approval, rejection and commercial demand all remained unresolved.